Economic Order Quantity with Discrete Demand and Delivery Orders

Reducing inventory costs is among the essential strategies for survival and profitability in today’s competitive environment. Classical inventory models have been developed to minimize inventory costs. However, they have several limiting assumptions. In this study, a three-level logistic chain consisting of a manufacturer, a distributor, and a retailer is considered. The problem of optimizing the inventory model for the distributor is examined. The distributor orders the products from the manufacturer. However, the manufacturer does not simultaneously deliver the total order and sends them in several discrete instances. In other words, it employs the multi-delivery strategy. Furthermore, the retailer’s demand is discrete and equal to a fixed amount at each equal interval of time. The distributor aims to determine the optimal order quantity and the optimal plan of receiving orders to minimize the total costs. Finally, the proposed problem is analyzed in a numerical example, and the results are compared with the classical inventory model. The results show that the proposed model has better performance with increasing holding and fixed ordering costs.